India's oilseed industry has submitted a proposal to the government to raise import taxes on palm oil and other edible oils, arguing demand for local output is being hurt after a sharp fall in prices, two trading sources told Reuters.

India's oilseed crushing industry gave the proposal to Farm Minister Sharad Pawar last week seeking a raise in crude edible oil import taxes to 10 percent from zero duty currently, said the Indian sources with direct knowledge of the plan. They asked not to be identified due to the sensitivity of the issue.

The industry wants to shore up domestic prices for India's farmers, who are sowing their rapeseed crop and have complained of dwindling returns due to cheaper imports from palm oil producing Indonesia and Malaysia, as well as soyoil-exporting Brazil and Argentina.

The sources said the proposal also called for refined edible oils import tariffs to be hiked to 20 percent from 7.5 percent now in a bid to safeguard the investment Indian refiners have made in building plants to process crude edible oil imports.

"This is a two-pronged approach to save India's industry and farmers," one of the trading sources told Reuters on the sidelines of an industry conference on the Indonesian island of Bali. "If nothing is done, people will suffer and no government will want that."